Saudi Aramco has FINALLY allowed an independent auditor to examine its books, as part of the required process of issuing bonds to buy SABIC. This removes a major obstacle to doing the planned IPO, which over the last several years has been delayed and postponed repeatedly.

The independent analysis by Moody's shows Saudi Aramco is immensely profitable, paying about 50 billion/year just in dividends to the royal family.

Moody's rated Aramco as investment grade, but did not give the company its top financial rating because of the direct control over Aramco by the Saudi Royal Family. It appears the dividend rate can be changed at any time by the royal family if they need more cash.

Plantagenet wrote:Saudi Aramco has FINALLY allowed an independent auditor to examine its books, as part of the required process of issuing bonds to buy SABIC. This removes a major obstacle to doing the planned IPO, which over the last several years has been delayed and postponed repeatedly.

The independent analysis by Moody's shows Saudi Aramco is immensely profitable, paying about 50 billion/year just in dividends to the royal family.

Moody's rated Aramco as investment grade, but did not give the company its top financial rating because of the direct control over Aramco by the Saudi Royal Family. It appears the dividend rate can be changed at any time by the royal family if they need more cash.

Until a down-hole analysis on all the depleting elephant wells is accomplished by a third party engineering firm, the "books" are just so much jihadi BS. What does Moody's know about oil reserves? They couldn't suss out the American mortgage bidness by 2005. So crap all to that 'audit', is what I say

You mean something like this?

February 12, 2019DeGolyer and MacNaughton is pleased to acknowledge the recent completion of the first contemporary independent assessment of reserves in Saudi Arabia for the Saudi Arabian Oil Company. The study encompassed a highly detailed independent analysis of a massive dataset and onsite review. More than 60 geophysicists, petrophysicists, geologists, simulation engineers, reserves engineering specialists, and economists were involved in the 30-month effort.

Below is a compilation of article links where you can find further information regarding our most recent work in Saudi Arabia.

Top oil exporter Saudi Arabia announced Wednesday a slight rise in its crude oil reserves after an independent audit, the first time in decades the kingdom has released any of its closely guarded field data. Saudi Arabia’s total proven oil and gas reserves stood at around 268.5 billion barrels of oil and 325.1 trillion standard cubic feet of gas at the end of 2017, the Saudi Energy Ministry said in a statement.

Saudi Arabia has opened up its vast energy reserves to independent auditors for the first time, a move that could help it revive plans to sell shares in state oil giant Aramco. The government of Saudi Arabia said in a statement Wednesday that US energy consultancy DeGolyer & MacNaughton had concluded that its oil reserves total 268.5 billion barrels. The estimate is slightly higher than the 266.3 billion barrel figure previously published by the Saudi government.

Allowing an independent company to assess its reserves represents a major shift for Saudi Arabia, which has for decades closely guarded data about its oil and gas industry.

pstarr wrote:BS. Stalling forever is not an accomplishment. Where is it, the reserve measures? Where are the numbers? It's been years. The dumb fecks claimed to have 12 mbpd 'capacity' in the runup to the Greatest Depression. To $147/barrel oil. Yet those Muslim Playboys never produced anywhere near that. Damn cheating liars is what those jihadi bastards are. Swing producers my @ss.

The goddamn health of the world depend on SA's ballooning reserves. The rest of the world's oil fields (save one or two) are in precipitous decline. If Moody's and the other cornucopians have some hard data . . . show it. Otherwise DeGolyer & MacNaughton and the rest are no better than the other terrorists. Stop hiding the data. Show me the new reserve analysis or STFU

Back to your usual mode of spouting nonsense and denying reality if your penchant for claiming oil insta-doom isn't backed up by the data I see.

Do you have CREDIBLE data to counter the data cited above, or only the usual empty ranting?

Yeah, given your history, I thought so.

Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.

Well, we have to go to this node from 2008 from the Oil drum to get the real story about Saudi reserves. Why do we have to assume no collusion on the part of the US ie. its energy consulting companies and KSA. They have every reason to conspire to not prematurely end the age of oil

Well, we have to go to this node from 2008 from the Oil drum to get the real story about Saudi reserves. Why do we have to assume no collusion on the part of the US ie. its energy consulting companies and KSA. They have every reason to conspire to not prematurely end the age of oil

perhaps you should remove your tinfoil hat. Degolyer & McNaughton and Gaffney Cline are two of the largest reserve audit firms in the world. They are governed by laws where legally they are now held accountable by the SEC and all other regulatory bodies for those reserve reports. They don't take this lightly as any money they would have been paid by the Saudi's for the audit pales in comparison to the annual returns they make around the world which would disappear if they were ever found to be falsifying reports. Not going to happen. The reserve audit companies have said the numbers from Aramco are correct and Aramco has come out officially stating what the reserve audits arrived at, numbers that are slightly higher than what they have been saying all along. It was announced in January that Aramco will be seeking $10 billion in bonds which is supposed to close in late second quarter of 2019. To issue those bonds they have to first issue a prospectus that must include the reserve report information along with their financial information.

But you would rather go with conspiracy theory speculation of what they might have rather than what has been actually reported? Why am I not surprised? Maybe you can join it together with your 911 theories. '

OK. The bond prospectus was released today. In that release they outline audit results of their finances and reserves. (I obtained this from a friend working in finance in the UK).

With regard to finances the prospectus states:

The Financial Statements have been prepared in accordance with IFRS and have been audited by the Company’s independent auditors, PricewaterhouseCoopers Public Accountants, as stated in their audit reports for the 2017 Financial Statements and the 2018 Financial Statements appearing on pages F-81 and F-3 of this Base Prospectus, respectively.

With regards to reserves the prospectus states

Unless otherwise indicated, any reference in this Base Prospectus to reserves of crude oil and condensate, natural gas or other hydrocarbons are reserves owned by the Kingdom that the Company has the right to operate and develop through the Concession and exclude reserves other entities have the right to develop, including AGOC, the Company’s wholly owned subsidiary, which operates in the partitioned territory between the Kingdom and the State of Kuwait.

The Company’s reserve estimates conform to the SPE-PRMS definitions and guidelines, which is the internationally recognised industry standard sponsored by the Society of Petroleum Engineers, the American Association of Petroleum Geologists, the World Petroleum Council and the Society of Petroleum Evaluation Engineers. To estimate or update the Company’s reserve estimates, the upstream segment employees responsible for reserves calculations perform technical analyses that are reviewed internally by progressively higher levels of management until finalised at year-end.

The Company retained independent petroleum consultants, D&M, to audit reservoirs the Company believes accounted for approximately 80% of the Company’s oil equivalent reserves as at 31 December 2017. The Company chose this scope because of the overall scale of the Kingdom’s reserves and the concentration of deposits in the major reservoirs that were assessed. Further independent assessment of the Company’s smaller reservoirs would have taken several years to complete. D&M’s reserves certification of 208.7 billion barrels of oil equivalent reserves was 0.1% higher than the Company’s internal estimation for the same reservoirs. The certification letter of D&M, which describes its procedures, conclusions and assumptions, appears as Appendix C to this Base Prospectus. The technical personnel responsible for preparing the certification of the reserve estimates at D&M meet the requirements regarding qualifications, independence, objectivity and confidentiality set forth by the Society of Petroleum Engineers. D&M is an independent consultancy firm and does not own an interest in the Company’s properties and is not employed on a contingent fee basis.

The certification of reserves letter from D&M

and the tables comparing Aramco reserve estimates versus those independently arrived at by D&M

and in the certification they state

In comparing the detailed proved reserves estimates prepared by DeGolyer and MacNaughton and those prepared by Saudi Arabian Oil Company for the properties evaluated, differences have been found, both positive and negative, in reserves estimates for individual properties that result in an aggregate difference of less than 0.1 percent. For the five largest fields in terms of proved reserves, the aggregate difference is less than 1.0 percent. It is DeGolyer and MacNaughton’s opinion that the proved reserves estimates prepared by Saudi Arabian Oil Company on the properties evaluated by DeGolyer and MacNaughton and referred to above, when compared on the basis of net millions of barrels of oil equivalent, in aggregate, do not differ materially from those prepared by DeGolyer and MacNaughton

DeGolyer and MacNaughton have released a bottom line number for total Saudi oil reserves, but I haven't seen any more detailed breakdown of this number.

One thing I'd like to see is an estimate of the remaining reserves at Ghawar. Even after 40+ years of production, this old supergiant field still comprises about half of the total Saudi oil production.

If Ghawar peaks and goes into rapid decline in the coming years, Saudi will be hard pressed to maintain their current rate of oil production, no matter what their oil reserves are. Its like Cantarell in Mexico---once they lost that supergiant field, the oil production for the entire country peaked and went into decline. The same thing could happen easily in KSA.

I thought that Aramco oil reserves were ~265 gigabarrels not that reserves were 265 gigabarrels of oil equivalent. If I back out the LPG and natural gas equivalents and gross up by 25% since only 80% is certified, I get 208 gigabarrels of oil reserves.

I thought that Aramco oil reserves were ~265 gigabarrels not that reserves were 265 gigabarrels of oil equivalent. If I back out the LPG and natural gas equivalents and gross up by 25% since only 80% is certified, I get 208 gigabarrels of oil reserves.

As I remember the Chairman of Aramco had indicated oil reserves of 227 billion barrels and total hydrocarbon reserves o 257 billion boe. If 208 Gboe represents 80% that works out to 260 Gboe. 80% of 227 Gbbls of oil is 181 Gbbls which is actually less than the 190 Gbbls of oil and liquids D&M arrived at. Seems to make sense. It would be interesting to understand what is still left in 2P and 3P. These numbers exclude the shared zone which I believe has an additional net 2.5 Gbbls.

Plantagenet wrote:One thing I'd like to see is an estimate of the remaining reserves at Ghawar. Even after 40+ years of production, this old supergiant field still comprises about half of the total Saudi oil production.

48.2 billion barrels according to the recently released info. And it's production is more like a third of Saudi production. Ghawar has been declining faster than estimates. That means other fields in Saudi Arabia must have been picking up the slack.

When Saudi Aramco on Monday published its first ever profit figures since its nationalization nearly 40 years ago, it also lifted the veil of secrecy around its mega oil fields. The company’s bond prospectus revealed that Ghawar is able to pump a maximum of 3.8 million barrels a day -- well below the more than 5 million that had become conventional wisdom in the market. “As Saudi’s largest field, a surprisingly low production capacity figure from Ghawar is the stand-out of the report”.

The 470-page bond prospectus confirms that Saudi Aramco is able to pump a maximum of 12 million barrels a day. While the prospectus confirmed the overall maximum production capacity, the split among fields is different to what the market had assumed. As a policy, Saudi Arabia keeps about 1 million to 2 million barrels a day of its capacity in reserve, using it only during wars, disruptions elsewhere or unusually strong demand. Saudi Arabia briefly pumped a record of more than 11 million barrels a day in late 2018. “The company also uses this spare capacity as an alternative supply option in case of unplanned production outages at any field and to maintain its production levels during routine field maintenance,” Aramco said in its prospectus.

Aramco also disclosed reserves at its top-five fields, revealing that some of them have shorter lifespans than previously thought. Ghawar, for example, has 48.2 billion barrels of oil left, which would last another 34 years at the maximum rate of production. Nonetheless, companies are often able to boost the reserves over time by deploying new techniques or technology.

In total, the kingdom has 226 billion barrels of reserves, enough for another 52 years of production at the maximum capacity of 12 million barrels a day.

In his book “Twilight in the Desert,” Simmons argued that Saudi Arabia would struggle to boost production due to the imminent depletion of Ghawar, among other factors. “Field-by-field production reports disappeared behind a wall of secrecy over two decades ago,” he wrote in his book in reference to Aramco’s nationalization. The new details about Ghawar prove one of Simmons’s points but he missed other changes in technology that allowed Saudi Arabia -- and, more importantly, U.S. shale producers -- to boost output significantly, with global oil production yet to peak.

The Saudis also told the world that their fields are aging better than expected, with “low depletion rates of 1 percent to 2 percent per year,” slower than the 5 percent decline some analysts suspected.

Yet, it also said that some of its reserves -- about a fifth of the total -- had been drilled so systematically over nearly a century that more than 40 percent of their oil has been already extracted, a considerable figure for an industry that usually struggles to recover more than half the barrels in place underground.On top of Ghawar, which was found in 1948 by an American geologist, Saudi Arabia relies heavily on two other mega-fields: Khurais, which was discovered in 1957, and can pump 1.45 million barrels a day, and Safaniyah, found in 1951 and still today the world’s largest offshore oil field with capacity of 1.3 million barrels a day. In total, Aramco operates 101 oil fields.

Plantagenet wrote:If Ghawar peaks and goes into rapid decline in the coming years, Saudi will be hard pressed to maintain their current rate of oil production, no matter what their oil reserves are. Its like Cantarell in Mexico---once they lost that supergiant field, the oil production for the entire country peaked and went into decline. The same thing could happen easily in KSA.

It seems to me Saudi Arabia has been more active in getting additional fields online besides their super giant field. In contrast to Mexico where they seemed more interested in milking Pemex for every penny.

After more than a decade of declining production, wasteful spending and a higher tax burden than any other driller in Latin America, it’s little wonder Mexico’s Petroleos Mexicanos is the world’s most indebted oil company. Pemex’s oil output has plunged by almost half since a 2004 peak, and its proven reserves are just a quarter of what they were almost two decades ago.

Its six refineries operate at about one-third of their capacity and lose more money with each extra barrel of crude they process, despite upgrade projects that began in the early 2000s. The $12 billion Tula Bicentenario refinery was scrapped five years after it was announced, and now the new government wants to spend $8 billion on another one in Dos Bocas. Pemex lost more than $1 billion dollars on decrepit fertilizer plants it purchased in 2014 and 2016 and squandered millions of dollars on a now-defunct electricity generation unit it created in 2015.

The company has sought to reduce spending over the years to shore up its finances. Yet the austerity measures, while helping to slow the acceleration of its debt, did little to prevent the pile from creeping higher -- to a whopping $107 billion. It’s also guaranteed that output would continue to dwindle as field maintenance and the development of new wells were suspended, and the revamp of its aging refineries delayed.

To make matters worse, Pemex has long been the government’s cash cow, accounting for about 20% of the annual federal budget. In the past two decades, 95% of Pemex’s pretax profits went to the government, which is higher than even PDVSA in Venezuela, according to Capital Economics.

In 2018, Aramco's earnings before interest, tax, depreciation and amortization were $224 billion. Aramco is the most profitable company in the world. By most measurements it is probably the most valuable company as well, which would give a potential Aramco IPO a valuation of at least more than $1 trillion at this time.

We now have some idea about the kingdom of Saudi Arabia's revenue. In 2017, in anticipation of an Aramco IPO, Saudi Arabia decreased the income taxes Aramco pays to the government from 85% to 50%.

When it's all said and done, Aramco may bring in about $80 billion or more (potentially significantly more) in cash. Moody's now says Aramco's 2018 net income was $111.1 billion. At the end of 2017, Aramco announced plans to spend $40 billion per year for ten years on capital expenditures. Aramco has the ability to fulfill its $40 billion Capex plans and more. Fitch reported that, at the end of 2018 Saudi Aramco had "cash and cash equivalents" of $49 billion. Clearly Aramco is accumulating cash, especially since its income tax rate was lowered. But even after Capex and setting aside cash, Aramco's profits could still be quite large.

To be clear, the information available from Fitch's press release is nothing compared to what would be available before an IPO.

To be clear, the information available from Fitch's press release is nothing compared to what would be available before an IPO.

this is a significant point. A few of the press reviews I've read focus on the taxation issues with Aramco (sliding scale royalties as well) and how that indicates their value is probably around $1.5 trillion versus the $2 trillion that Aramco has suggested an IPO could bring in. But all of those analyses look at Aramco only. The whole point of the prospectus was to raise money through bond issuance to aid in the purchase of SABIC. The IPO would be Aramco bolstered with it's ownership of SABIC and the inherent free cash flow that would come with that. That requires looking at the financial in a manner that you could see the combined entity. The combined entity should be worth much more given the current cash flow from SABIC, assuming Aramco decides to keep the company as one unit rather than splitting into an upstream and downstream component.

DeGolyer and MacNaughtonPursuant to your request, this report of third party presents an independent evaluation, as of December 31, 2017, of the extent of the net proved oil, condensate, liquefied petroleum gas (LPG), and marketable gas reserves of certain properties onshore and offshore the Kingdom of Saudi Arabia in which Saudi Arabian Oil Company has represented that it holds a 100-percent interest. This evaluation was completed on November 30, 2018.

Methodology and ProceduresEstimates of reserves were prepared by the use of appropriate geologic, petroleum engineering, and evaluation principles and techniques that are in accordance with practices generally recognized by the petroleum industry and in accordance with definitions established by the PRMS. The method or combination of methods used in the analysis of each reservoir was tempered by experience with similar reservoirs, stage of development, quality and completeness of basic data, and production history.

The reserves estimates presented herein were generally based on consideration of drilling results, analyses of geophysical and geological data, well-test results, pressures, and core data available through December 31, 2017. Production data from wells drilled on the properties evaluated herein were provided through December 31, 2017. Where applicable, estimated gross production through December 31, 2017, was deducted from gross ultimate recovery to arrive at gross reserves.

Primary Economic AssumptionsThe following economic assumptions were used for estimating the reserves reported herein:

CERTIFICATE of QUALIFICATIONI, Regnald A. Boles, Petroleum Engineer with DeGolyer and MacNaughton, hereby certify:1. That I am a Senior Vice President with DeGolyer and MacNaughton, which firm did prepare the report of third party addressed to Saudi Arabian Oil Company dated November 30, 2018, and that I, as Senior Vice President, was responsible for the preparation of this report of third party.2. That I attended Texas A&M University, and that I graduated with a Bachelor of Science degree in Petroleum Engineering in the year 1983; that I am a Registered Professional Engineer in the State of Texas; that I am a member of the International Society of Petroleum Engineers; and that I have approximately 35 years of experience in oil and gas reservoir studies and reserves evaluations.

The Financial Post has gone through the newly released Aramco oil production and reserve data and they think the most important new information is that the report shows that Ghawar has peaked. Ghawar used to produce ca. 5 million bbls/day just a few years ago, but now can only produce ca. 3.8 million/bbls/day today.

That means a ca. 20% decline in production has already occurred at Ghawar, apparently just in the last few years.

The Financial Post has gone through the newly released Aramco oil production and reserve data and they think the most important new information is that the report shows that Ghawar has peaked. Ghawar used to produce ca. 5 million bbls/day just a few years ago, but now can only produce ca. 3.8 million/bbls/day today.

That means a ca. 20% decline in production has already occurred at Ghawar, apparently just in the last few years.

There is no way of telling from the Prospectus if the decline in average production rate at Ghawar is due to problems encountered or rather is a part of their overall management scheme. I’m thinking the latter based on some of the notes in the prospectus:

The Government determines the Kingdom’s maximum level of crude oil production in the exercise of its sovereign prerogative. Accordingly, the Government may in its sole discretion increase or decrease the Kingdom’s maximum crude oil production at any time based on its sovereign energy security goals or for any other reason, which may be influenced by, among others, global economic and political conditions and their corresponding impact on the Kingdom’s policy and strategic decisions with respect to exploration, development and production of crude oil reserves.

This is a simple way of stating that the government attempts to balance it’s internal needs for capital with the requirements it has as a lead OPEC member coupled with a healthy understanding of global supply/demand dynamics. It understands the need for some spare capacity in the system given the near train wreck they faced back in 2006 when spare capacity was zero and global demand was accelerating. They also understand that spending CAPEX today on spare capacity you might not utilize for sometime is money badly spent. As a consequence it is a bit of a juggling game and they have decided 2 MMB/d is the appropriate number.

The Government’s decisions regarding crude oil production and spare capacity, and the Company’s costs of complying with such decisions, may not maximise returns for the Company. For example, the Company may be precluded from producing more crude oil in response to either a decrease or increase in prices, which may limit its ability to generate additional revenue or to increase its production of downstream products.

And

The Company actively manages its prolific reserves base in accordance with the Kingdom’s laws and regulations to maximise long-term value while optimising ultimate recovery from its fields. Because of the size and number of its fields and spare capacity, the Company is able to maintain its desired level of overall production by tapping into new reservoirs when required to improve long term value through portfolio capacity optimisation. This approach, which differs from the typical industry practice of maximising production rates per field, is more capital efficient given the nature of the resources available and leads to stable production and higher ultimate oil recoveries.

When those two statements are taken in context what it means is ARAMCO can’t just bring new wells on in fields without understanding how it impacts their overall MSC. If they are already producing at MSC then bringing on a new well strategically in one field would require shutting in equal amounts of production elsewhere. As ARAMCO states they would do this based on their understanding of what the best management strategy is to optimize recovery. In the case of Ghawar we know that they have been busy bringing on new production in Khurais and Shaybah and that Ghawar has now produced somewhere around 60% of its currently recoverable Proven reserves. It is entirely possible that ARAMCO has brought on oil elsewhere at the expense of drilling new MRC sidetracks in Ghawar simply since they see this as helping them achieve their goal of optimizing overall recovery across the entire fields. As well the oil produced in SA is somewhat variable and ARAMCO may have decided to increase their capacity associated with the super light fractions to take advantage of demand from certain refiners. The numbers don’t tell you the reasoning unfortunately.

When it is all said and done whether Ghawar production has peaked or not is of much less consequence than was espoused in Twilight in the Desert. The comment was always made back then “where goes Ghawar so goes the whole of Saudi Arabia and the oil industry” and that has been shown in the prospectus assessment to be untrue. Ghawar production back when Simmons was ranting about this all the time was around 5 MMbbl/d according to ARAMCO and overall SA production was around 8 to 8.5 MMbbl/d meaning Ghawar indeed made up the majority of production. Rather than suddenly fall off a cliff as Simmons predicted Ghawar kept trucking along at a relatively stable water cut and depletion rate for another decade. And today Ghawar only makes up one third of the total ARAMCO production whereas total ARAMCO production is about 20% higher meaning Ghawar was not as important as suggested. Indeed ARAMCO has increased their spare capacity to 12 MMbbl/d while decreasing production at Ghawar. If Ghawar did peak Saudi Arabia as a whole certainly did not. All fields reach maximum production at some point and they all have a reserve life associated with them. For Ghawar the reserve life associated with Proven reserves is still pretty significant …48 Gbbls. To keep that reserve number in perspective that is larger still than the bulk of Super Giant fields original recoverable reserves (eg. Canteral, Aghajari, Tengiz, Majnoon etc) and there are only a few fields whose original recoverable reserves are bigger than the remaining reserves at Ghawar (eg. Burgan, Gachsaran) and it is pretty close to what was the total oil reserves of the US at the end of 2017. Not insubstantial by any stretch of imagination.

And the total reserve life for Saudi Arabia just based on Proven Reserves is around 60 years. What is significant in the prospectus is the statement:

The organic crude oil and condensate reserves replacement ratio based on the Kingdom’s reserves on a three year rolling average from 2016 to 2018 was 104%. The organic oil-equivalent reserves replacement ratio based on the Kingdom’s reserves on a three year rolling average from 2016 to 2018 was 127%. Reserves replacement ratios are calculated on reserves changes relative to net reservoir withdrawal from operated fields, rather than production volumes.

What that means is beyond the stated Proven Reserves which have been audited by D&M there is obviously a significant amount of Probable and Possible reserves that are continually being upgraded to replace produced Proven reserves. So the actual reserve life associated with 3P is probably very significant.

There is no way of telling from the Prospectus if the decline in average production rate at Ghawar is due to problems encountered or rather is a part of their overall management scheme.

Either the prospectus is a true, transparent report on Saudi Aramco's oil fields or it isn't. IF the current maximum production rate at Ghawar reflects just a management decision, and the actual production capacity is higher, then the Bond prospectus is a fraud, as it clearly states the current production capacity of Ghawar is 3.8 million bbls/day.

The prospectus clearly lists the production of capacity of all of KSA's oilfields----in fact this is one of the central disclosures of the report. Before investors buy bonds from Aramco they will demand to know some basic facts, i.e. what the production capacities and reserves of their oilfields are. Thats why the bond prospectus was prepared---to meet transparency requirements of international financial markets. The chances that the Saudis are trying to commit some kind of fraud by reporting false numbers in the bond prospectus seems remote, IMHO.

SO, lets accept facts. The production capacity of Ghawar has just been reported to be 3.8 million bbls/day. This represents a 20+% drop from previous estimates of the field's capacity. For instance, the US government estimated Ghawar to have a production capacity of 5.8 million/bbls day as recently as 2017.

This indicates Ghawar has peaked and gone into production decline.

“As Saudi’s largest field, a surprisingly low production capacity figure from Ghawar is the stand-out of the report,” said Virendra Chauhan, head of upstream at consultant Energy Aspects Ltd. in Singapore.

Either the prospectus is a true, transparent report on Saudi Aramco's oil fields or it isn't. IF the current maximum production rate at Ghawar reflects just a management decision, and the actual production capacity is higher, then the Bond prospectus is a fraud, as it clearly states the current production capacity of Ghawar is 3.8 million bbls/day.

Not the case. The government decides what the MSC is for the company which includes the spare capacity requirement. It is up to the company to decide how it applies that MSC across the various field as is stated in the prospectus. Each year Ghawar has had additional wells drilled as well as re-entries in the MRC wells (they use expandable liners and SMART completions in order to shut off certain laterals and drill new ones which are brought on stream). That was all done in order to maintain the target production rate ARAMCO had for Ghawar as each year wells reach their economic limit (such is the case for all oil wells everywhere, Ghawar being no exception) and need to be replaced. IF they decided that their interests of optimizing ultimate recovery was better served by increasing production at other fields at the expense of Ghawar they simply stop drilling new laterals in Ghawar for the time being or at least limit drilling substantially. As a consequence, the MSC (which represents what they can bring on stream quickly at minimal additional CAPEX) drops. It doesn't necessarily mean the field isn't capable of higher production rates if capital investment was directed that way and it doesn't mean the field MSC can't increase at some point in the future.

The chances that the Saudis are trying to commit some kind of fraud by reporting false numbers in the bond prospectus seems remote, IMHO.

which they are not. I think you have a misunderstanding of what MSC is and how ARAMCO manages it.

This indicates Ghawar has peaked and gone into production decline

at this point the production is less than it was which if it never recovered it would meet the definition of peak production. What I am saying is based on the reporting in the prospectus you can not tell if Ghawar is capable of being produced at a higher rate if ARAMCO decided to drop production at another field and increase it at Ghawar.

and the main point I was making is it doesn't seem to matter if it has peaked for ever or not. Everyone here was wringing their hands and having kittens over worries that Saudi Arabia would implode if production declined at Ghawar. Such is not the case, they have more than replaced it and the life left in Ghawar is still very, very significant.

at this point the production is less than it was which if it never recovered it would meet the definition of peak production.

Yup. Thats my point exactly.

Back here in the real world Ghawar production has now fallen over 20% from its peak.

And that a very interesting development indeed.

Looking back, I would guess that concerns over a decline in Ghawar production contributed to the decision at Saudi Aramco in 2015 to test CO2 injection in one part of the field. Based on the information in the 2019 Bond prospectus, its apparent the CO2 test project hasn't yet succeeded in boosting Ghawar daily oil production back to its prior levels.

Back here in the real world Ghawar production has now fallen over 20% from its peak.

And that a very interesting development indeed.

Looking back, I would guess that concerns over a decline in Ghawar production contributed to the decision at Saudi Aramco in 2015 to test CO2 injection in one part of the field. Based on the information in the 2019 Bond prospectus, its apparent the CO2 test project hasn't yet succeeded in boosting Ghawar daily oil production back to its prior levels.

you apparently didn't bother to read anything I wrote. The Ghawar production limit is something that ARAMCO can manage. If they have moved CAPEX spending elsewhere in order to maximize overall reserve recovery (which they say in the prospectus is their main goal) Ghawar production and MSC will be down for reasons other than something happening in the reservoir.

They are managing production in the fields meaning the current production level may have no bearing on what the field is actually capable of. You immediately assume that Ghawar production is down because that is the best the field can now produce, that does not have to be the case and the fact that ARAMCO states they manage production in their fields to optimize both recovery and sales of various grades suggests there is more going on here and the granularity is not presented.

Bottom line is that you cannot tell if the decrease in production is self-imposed so that they could increase production elsewhere given they have a limit as to what the total MSC is. There might now be limits to producing Ghawar but then again there very well may not be. The prospectus does not allow you to determine which is the case, my point all along.

and if this is all based on your former comment:

If Ghawar peaks and goes into rapid decline in the coming years, Saudi will be hard pressed to maintain their current rate of oil production, no matter what their oil reserves are

the prospectus proved that to be an incorrect assumption given Ghawar production is down and it has been more than replaced.